David Leonhardt Punctures Right-Wing Tax Myths

Last week the Drudge Report flagged an Associated Press report (4/5/10) by Stephen Ohlemacher with the headline: “Rob Thy Neighbor: Half of American Households Pay No Fed Income Tax.”

The piece in questionsaid more or less the same, making it a popular item for right-wing pundits eager to pounce on tax freeloaders. But the AP article was problematic right from the start: “Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it’s simply somebody else’s problem.”

Ohlemacher later elaborated:

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners–households making an average of $366,400 in 2006–paid about 73 percent of the income taxes collected by the federal government.

The piece leaves out some crucial context–namely, how the wealthy have fared in recent years. If you’re going to point out that they’re carrying much of the income tax burden, you might want to note that could have something to do with how much they’re earning.

New York Times business columnist David Leonhardt (4/14/10) writes a valuable corrective to this today, pointing this out:

Over the last 30 years, rates have fallen more for the wealthy, and especially the very wealthy, than for any other group. At the same time, their incomes have soared, and the incomes of most workers have grown only moderately faster than inflation.

So a much greater share of income is now concentrated at the top of distribution, while each dollar there is taxed less than it once was.

The headline figure touted by AP and Drudge–that 47 percent pay no federal income tax–is a “distraction,” writes Leonhardt. And while it might be true when it comes to income taxes, it misses the point when it comes to the overall tax burden:

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Activism Director and and Co-producer of CounterSpinPeter Hart is the activism director at FAIR. He writes for FAIR's magazine Extra! and is also a co-host and producer of FAIR's syndicated radio show CounterSpin. He is the author of The Oh Really? Factor: Unspinning Fox News Channel's Bill O'Reilly (Seven Stories Press, 2003). Hart has been interviewed by a number of media outlets, including NBC Nightly News, Fox News Channel's O'Reilly Factor, the Los Angeles Times, Newsday and the Associated Press. He has also appeared on Showtime and in the movie Outfoxed. Follow Peter on Twitter at @peterfhart.

“Even before the Great Collapse of ’08 destroyed the value of their homes, robbed their pensions, and took their jobs, American families were slipping behind, and are worse off now than they were thirty years ago. Over these past three decades, workers actually increased their productivity but did not share proportionately in the rewards of their labor. Those went largely to the top.

Since 1980, the year Ronald Reagan was elected president, the incomes of people at the top have doubled while those in the middle and at the bottom have remained flat.

Let me throw some more statistics at you. You’ll find their sources at our site online. Keep in mind that each of these numbers represents lived human experience.

In this richest of countries, more than 40 million people are living in poverty.

At some point in their childhoods, half of America’s children will use food stamps to eat.

Some 30 million workers are unemployed or under-employed, and for those still working, the median wage today is about $32 thousand a year, which is why so many people are working two jobs trying to make ends meet.

Meanwhile, as the economist Robert Reich recently reminded us, in the 1950’s and 60’s, the CEO’s of major American companies took home about 25 to 30 times the wages of the typical worker. By 1980 the big company CEO took home roughly 40 times the worker’s wage. By 1990, it was 100 times. And by 2007, executives at the largest American companies received about 350 times the pay of the average employee. In many of the top corporations, the chief executive earns more every day than the average worker gets paid in a year.

And then there’s the financial world. Case in point: Ken Lewis, who at the end of 2009 retired as CEO of Bank of America. Only recently did we learn that, not long after his company received $45 billion in taxpayer dollars from the big bailout, Lewis raked in more than $73 million in pension benefits and stock, and was given an insurance policy worth $10 million to his beneficiaries.

But compared to some people, Ken Lewis is a piker. Hedge fund managers, who bet that taxpayers — you — would pay to keep the banks from collapsing, hit the jackpot. Last year, one of them alone made a cool four billion dollars. The top 25 scooped up a total of 25.3 billion.

So for those who played their cards right, there were profits galore to be made from the bailout. Just this week, the non-profit Center for Media and Democracy reported that federal agencies poured out a total of $4.6 trillion dollars ÃƒÆ’Ã†â€™Ãƒâ€šÂ¢ÃƒÆ’Â¢”Ã…Â¡Ãƒâ€šÂ¬ÃƒÆ’Â¢ÃƒÂ¢”Å¡Â¬Ãƒâ€¦“ trillion dollars – to keep the banks and Wall Street from meltdown. Those financial institutions have yet to pay back about two trillion of that, but who’s counting?”

Add this to what Bill Moyer’s said. The following was reported on 8/28/2008:

Just like the corporations they work for, multi-millionaire executives have become experts at accounting tricks to avoid paying taxes, according to a new study that builds on last month’s Government Accountability Office report.

The GAO said a majority of American and foreign companies doing business here pay no income tax. Now “Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay” shows how CEOs and other top executives shield huge portions of their income and stock options from tax obligations. The report was published this week by the Institute for Policy Studies and United for a Fair Economy.

For instance, unlimited deferred compensation accounts, a perk for CEOs at large companies, add up to $80.6 million a year in lost tax revenue. The median value of top executives’ deferred payments is $4.5 million, according to Equilar, a pay analysis firm. Most of the rest of us, however, are limited to a maximum of $15,500 a year we can shield in a tax-deferred 401(k) account.

The authors of the report say the tax loopholes make the huge and growing gap between worker and CEO pay even bigger. They say labor law reform, specifically the Employee Free Choice Act, is critical. “Without legislative action to allow more workers the right to organize, the divide between compensation for top executives and the rest of us will only continue to grow.”

Wow a magazine called “FAIR” actually thinks this is all fine and dandy because why? Rich people deserve to be punished because they are rich? I expected to see something that would counter the obvious argument that everyone is making – the system is unfair. It punishes success and rewards laziness and forces the successful to pay everyone else’s bills. Countering that by telling us how successful rich people are only bolsters the unfairness argument. Unless you think all rich people stole their money or earned it through some underhanded means (extremely childish) then their profit is a reflection of some product or service that they traded for the money which means they have ALREADY contributed something valuable to society and deserve to reap the rewards, not have it torn from them by Marxists like Sheldon.

You are an idiot. The arguments against your position are so numerous that I don’t even know where to begin. Its like trying to explain differential calculus to a todler….so I won’t even start. I will advise you however, to take a class in “critical thinking”; you desperately need it.

To Ben O,
Many of those who ‘earned’ their money did so at the government trough. If a Raytheon employee has to pay taxes on their $1 million income, and all of that money is from federal spending, perhaps they should pay some back. Your fascist government theory where the ‘people’ pay their taxes just to support the wealthy like Raytheon and Martin Marietta hasn’t worked unless you count the early successes of Germany and Italy or the empire of Japan. Despite the Bush family’s early support of Hitler, he still failed, the master race and all that included. Isn’t that pretty much what you’re saying, that only those that contribute to the fatherland should be benefitting from its success? I suppose if you’re one of the ones on top like Goldman Sachs, or Cheney, it does work. You might want to try spending a day being poor. Pretend you’re working for the minimum wage and try to live that way. Grovel just a little. Learn.

How childish. You use the behavior of “some” rich people to justify pilfering all of them. Thank for demonstrating the liberal collectivist mindset. The richest 1% are paying for 43% of the income tax and you would find any excuse to take more if you could. Nothing resembling morality even enters into your reasoning does it?

By the way fascism is when the government has a different set of rules for different individuals. That’s what you want.

Regardless of what “should” or “shouldn’t” be the result of free market capitalism is to improve the lives of everyone including the poor. That’s why poor people in this country have cell phones and video games and TV’s in every room.

That’s right, frank67–once again, B.O. comes in here and makes a fool of himself (cell phones and teevees in every poor person’s bedroom–and the ingrates’ Socialist betters complain!). Only in the good old USA do we find so many hapless proles like B.O. defending the rich man’s right to lie, cheat and steal. B.O. , feeling the State’s boot on his neck (said boot absolutely in the employ of the rich folks he so gamely defends) screeches “Push down harder, please! I deserve it, and so do you!”
I’ve got news for you, B.O.: Most of the rich don’t pay any where near what they should be paying. To imagine that somehow it’s “immoral” that the stricken rich should suffer the insult of a, say, 75% rate (what they should be paying) is to demonstrate for all here that you’re a toady, ready to bow and scrape when the Big Man’s Caddy rolls over your neighbors’s kids. By the way, the definition of Fascism is not ” . . . when the government has a different set of rules for different individuals.” Just like an ignorant Bagger–you don’t what the hell your talking about, and everything you profess to know is absolutely wrong–and deeply immoral and selfish, to boot. But soldier on, son. The hole you’ve dug is deep, and it is wide, and you can only eventually come to the daylight on the other side of the world if you keep digging. Semper Fi!

So we should feel sorry for rich people because they actually pay taxes? Aren’t they still rich? Arent’t the rich still getting richer? As I understand it, medical emergencies are the cause of most bankruptcies, not taxes.

Wow, calling the poor “lazy”. That’s pretty callous. With one million homeless American school children, everyone needs to take a serious look at our plight and do more than defame. Millions losing jobs and homes. These aren’t bad people. These are bad times. Give a dirty, depressed human ten dollars, someday it could be you.

SHAME on you and your ignorance. When the meek inherit the earth – they and the poor will eat the rich -their oppressors.
Thank you people, and Bill Moyers, for your clear lucid arguments against the destruction of America by the greedy. Personally, I’m rich and I try to share and not steal from my employees – sorry, I can’t say that about so many who support socialized welfare for the super rich.
For those who think the poor are lazy – please open your eyes to the enslavement of people. Let not greed and lies cloud your eyes.

wow! drudge’s frame, that somebody is being” robbed by their neighbor” is incredibly pathetic even by his dubious “standards.” the reason lots of people, including heads of households, pay little to no federal income tax is due to the earned income credit, the child tax credit and that standby of any homeowner filling out their schedule “a,” the morgage deduction….in other words, the government provides tax breaks for people that marry, buy homes and have kids..the resulting low to no taxes is the desired policy outcome…if that’s a problem, blame the policy [or the policy makers] not your nieighbors, who are simply playing by the rules….. plus, an important number that ohlemache doesn’t provide is what percentage of total income does the top 10% generate….without knowing how closely it matches his 73% number, we can’t know how “unfair” this all is….and remember, our tax rates cease to increase once someone’s income passes that $373k mark…by the standards of other western countries, people at the top are not overtaxed….

While this article makes some valid points it promulgates the right wing media meme that 47% pay no federal income tax. This is completely false. The standard deduction for a single person is $5700, so any income above this is taxable. How many people that you know make $5700 per year? The numbers don\’t change much for the other standard deductions, which is the type of filing most people do at the low end of the income scale. This assertion by the right and the media is total fabricated bullshit. They should be ashamed of themselves, but this is an impossibility from the compassion and empathy impaired.

WHY IS PAYING TAXES SUCH A NEGATIVE ACTION??? OUR TAXES ARE USED FOR MANY PUBLIC BENEFITS THAT ENRICH ALL OF US. ONCE AGAIN, AS PREVIOUSLY POINTED OUT, CRITICAL THINKING GETS THROWN ASIDE WHEN A RAMPAGING GIANT ENTERS THE ARENA OF DISCUSSION….TAKING WORDS AND RE-INVENTING THEM IN TOPICAL CONTEXTS THAT REMOVE THERE POSITIVE SIDE IS THE NEW RIGHT-WING DIRECTION. IF WE RESORT TO RESPONDING TO THEIR HOUSE OF CARDS LOGIC, WE VALIDATE THE ARGUMENT.
THE QUESTION ABOUT TAXES THAT WE ALL COULD PARTICIPATE IN IS …HOW CAN WE MAKE BETTER USE OF OUR TAXES AND CREATE A OUTCOME THAT IMPROVES OUR SOCIETY.